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Welcome to Victoria Gold Corp. Third Quarter 2020 Operating and Financial Results and Updates. Today's conference is being recorded. At this time, I'd like to turn the conference over to John McConnell, Director and CEO. Please go ahead, sir.
Good morning, afternoon or evening, everyone. Again, my name is John McConnell, President and CEO of Victoria Gold. I'm joined today with our senior management team: Marty Rendall, CFO; Mark Ayranto, COO; Dave Rouleau, VP and General Manager; and Paul Gray, VP, Technical Services.To start, I'd just like to summarize the Q3 results, and then we'll open it up for questions. So from an operational highlights, we achieved commercial production on July 1, 2020. During the first quarter of commercial production, we mined 2.1 million tonnes of ore and stacked 1.9 million tonnes at an average grade of 0.85 grams per tonne. Gold production during the quarter was 35,312 ounces. Gold sold during the quarter was 32,029 ounces at a realized price of USD 1,886 per ounce. Cash costs were USD 804 per ounce and all-in sustaining costs were $1,350 per ounce.Now in the press release, we talked about some operational challenges and improvements we've made during the quarter. Not all have been completed, but we have made a number of changes that include the feeders of the tertiary crushers, it's been an improved design to reduce maintenance and increase productivity. We've had much higher wear in the plant than anticipated. This is required that we change liners, and we're in the process of that. Not all of the changes have been made, but we've identified where changes need to be made, and we expect that work to continue through to the end of the year.Control systems, there's been a number of process logistic upgrades, which will reduce new suits shutdowns. The dust control system in the crushing plant, we've improved that, and that has dramatically improved safety and productivity. We've also had a number of issues with the grasshopper conveyors on the leach pad. One is the wear we've had to redesign a number of the grass offers to reduce the ware again, this is a liner issue. But also we had a number of grasshoppers that were undersized in terms of horsepower. That's been generally rectified. New motors are arriving on-site now, and the work will be complete by the end of the year.And last but not least, I just want to make a comment on COVID. It has certainly impacted our operation. While we have been able to work with government and various regulators to maintain operations, it, no doubt, has had an impact on both productivity of our workers and increasing the costs.And then finally, I'll just summarize, we have restated our guidance. Originally, our gold production was anticipated to be 85,000 to 100,000 ounces this half. We've reduced that to 72,000 to 77,000 ounces. And corresponding to that, our all-in sustaining costs have gone from $950 to $1,100. We've increased that range from USD 1,175 to USD 1,275 per ounce.And now I'll turn it over to questions. Operator?
[Operator Instructions] And our first question comes from Andrew Mikitchook with BMO Capital Markets.
Can you just kind of give us a sense of what you think that the stacking could be in Q4 compared to Q3? Like with some of these changes still underway, should we expect an increase in stacking in the quarter -- quarter-on-quarter? Or is it kind of more of a flat situation until this is all wrapped up and you have room next year to come up to design stacking rates?
Yes. I mean, the fourth quarter is still challenging. It's difficult to make these repairs, while you're trying to operate. We're doing the best we can. And I think from the guidance we've provided, you can see the fourth quarter is, again, challenging. But we are getting all the repairs done now, and we anticipate the first quarter of 2021 will be shut down because of weather. Again, we've always planned that we won't stack during the coldest months of the year. But that sets us up really well for the balance of 2021.
Okay. And can you take us through any more commentary on grade reconciliation or essentially heap leach kinetics? I think essentially that both were addressed, with about one sentence in the press release saying that it is in line with expectations. Do you have any further commentary or qualification to that?
Yes. I think what I'll do is there's 2 questions there. And there are certainly questions any investor should ask a new mining operation. How is the grade reconciling? And two, how is recovery reconciling? And for the first one on grade, I'll ask Paul Gray, our VP of Technical Services, to address the question.
Thanks, John. Thanks, Andrew. Yes. Good question, of course. The Eagle ore body is performing very well. As far as grade reconciliation goes, it is a well-behaved ore body. We've had very good reconciliation between our blast, haul models and our reserve model in specific, particularly within the area that we define as the mineralized shell is within the feasibility study. It's a well-behaved ore body, as I said before, and I think that needs to be underscored. The one thing I will mention is outside of that restricted mineralized shell, we've defined everything as waste. We are running into some, what we're calling, bonus material, bonus ore outside of that. So we're seeing an increase in tonnage and grade related to that. But in general, when we're in our ore body and we're building down into of each bench, getting closer and closer to the heart of the deposit, it's performing very well. So we've had no surprises, and we're well within expectations.
Okay. Thanks, Paul. And for the second question there in terms of leach kinetics and where we are with recovery, I'll ask Mark Ayranto, our Chief Operating Officer, to address that.
Yes. Andrew, thanks for the question. On the kinetics, the short answer is the metallurgy and the metallurgical response as it relates to recovery is tracking very well to what we have expected and how we've guided. So when we have the kinetic curves that allows us to determine when and how much gold we get out of the rock. And when we when we update our model for the exact tonnage that we get on the pad, the rock type, the crush size and keep our kinetic curves. We are tracking incredibly well to our predicted model. So right now, it's looking really good. The permeability is looking really good. We anticipate that to continue. We certainly continue some ongoing met testing to help optimize ultimate crush size and permeability and primary leach rates, et cetera. But no red flags there, and we're incredibly happy with what we have guided from a recovery standpoint, and things are looking very good.
Okay. Thanks, Mark. Does that answer your question, Andrew?
That does, John.
Our next question comes from [ Gold Singer ] with CEO.CA.
John, when did you start to become aware of this abrasiveness sort of problem that you guys have had? And in terms of the longer-term cost of this mine, are we still looking at sub $1,000? And can you give us any guidance further out in terms of the cost and how this affects the operation longer term?
Yes. Thanks for the question, Robert. We still guide to the technical report that we put out in December of last year. We think that the costs and tonnages and production that are identified there are still very much valid. So I'd refer you to that document. I would say the abrasiveness issue we saw early on. And one of the challenges was, everything wears out at about the same time. So we needed to get maintenance onto a new schedule. And in some cases, we had to change things out earlier than we wanted to, but you have to get everything balanced, and it just takes some time to do it.
Our next question comes from Justin Stevens with PI Financial.
Bunch of other stuff I was looking to hit on has already been answered, but just a couple left from me. Any major capital items that you guys are expecting sort of from now through the middle of next year?
Thanks for the question, Justin. It's -- I can't really guide to that right now, except to say, again, referred to the technical report, December of last year, we're on track with the sustaining capital that was identified in that report. Nothing unusual.
Yes, yes, yes. That was more of what I was wondering. And on your strip ratio, I mean, I know if you guys are planning to stop stacking, obviously, during the coldest months and cover the pad, obviously, mining will continue. Is there going to be sort of a focus on moving, I guess, waste or marginal material during the winter months, like there was last year to obviously sort of, if you're not going to be crushing it to the pad anyways, you may as well just sort of limit your hauls with the plan again for the coming winter [ year ]?
Yes. Although we won't be stacking, we will continue to mine and primary crush and stockpile that material. So we'll get ahead on the ore and get that stockpiled. But we always like to take advantage of an opportunity to mine higher amounts of waste so that we benefit in the future. There is an additional cost of that. So you have to balance it.
Yes, exactly. And then obviously, then the -- sort of the effective strip would tick up as a result when you -- in those periods. That makes sense. Just -- and then just in terms of the debottlenecking and the sort of the [ invested ] improvements, how much of those costs roughly are sort of in Q3 versus probably into Q4? Is it about half-half or leading towards Q4?
Yes, I'd say they're half-half.
Okay. Yes. And then just the -- sort of the -- is the capitalized stripping plan sort of going to remain about the same as sort of through into next year? Or is there any lumpiness there, I guess, sort of we've discussed with potential in sort of Q1 to be a bit heavier?
No. We're operating to the plan that was laid out in the technical report.
And we'll go to Andrew Mikitchook with BMO Capital Markets.
John, just a quick follow-up on that sustaining capital, which rolled in at about $20 million in the quarter. But all else being equal, that would be a sustainable amount going forward, right?
Well, I think we broke it down. Maybe I'll ask Marty to remind us how that breaks down. So Marty Rendall, our CFO.
Thanks, John. And Andrew, the sustaining capital right now is a little bit interesting because what we've been doing in Q3 and will continue to do in Q4 is our waste stripping above our strip ratio, which life of mine is about 1.0. Anything above that 1.0 strip ratio, we're capitalizing. And that's a little different than we anticipated previously, but we worked with our auditors on this capitalized stripping accounting treatment. And so we've had a lot of that waste movement that we capitalized in Q3 because about $6 million over that Q3 sustaining capital was moving waste. And in the technical report, that was considered a expense rather than a capital. So it's a movement from line items from expense to a capital line item that doesn't affect cash flow, and it doesn't affect bottom line all-in sustaining costs. But it does make our sustaining capital and our mining expenses look a little lower when we move more waste than ore during a quarter, and that is expected to continue in Q4.
John, if I could just follow up with one on the last question. And generally, the crushers themselves -- the 3 phases of crushing, the crushers themselves operating as expected. You've talked about the wear plates in this and not, but the actual equipment, how is that performing?
Yes. Our General VP and General Manager, Dave Rouleau, one of his favorite saying is all the pots and pans are working fine. It's some of the things in between that aren't working well. And so as laid out in the press release, we've made a number of changes in design of shoots. We've had to replace liners. But the crushers are -- themselves are all working very well.
[Operator Instructions] Our next question comes from [ Dea Wilson ], a private investor.
John had mentioned restructuring the debt to achieve lower interest rates back in the summer. Can you just let us know how you're doing on that front?
Yes, good question. Yes, we are -- we did go out to a number of banks on refinancing the debt. And we're making good progress on that. And I can't provide a time line right now, but I would say stay tuned. Certainly, Marty and our consultants are working as fast as we can to get that done, and you'll see an announcement in the coming months.
At this time, there are no further questions.
All right. Well, thank you, operator, and thank you, everyone, for joining in. And our next regular call will be after the fourth quarter results are released. Thank you.
Well, thank you. That does conclude today's conference. We do thank you for your participation. Have a wonderful day.